With year after year of large premium increases, it’s no wonder many employers are happy to receive a health insurance renewal below 10% – but low-percentage renewals can often gloss over key changes to the policy that are not boldly highlighted in the renewal offer. So what kind of changes are we talking about here?
A good example is found in many community-rated markets where the out-of-network reimbursement schedule is reduced from the 70th or 80th percentile (meaning the plan will pay based on the average charge for the top 70% or 80% of providers in the area the claim was incurred) to 140% of what Medicare will reimburse for medical services. Even though 140% sounds better than 70%, it’s actually a very significant benefit decrease; equating to a payment reduction of 50% in some areas. A change of this type would normally translate into a 2%+ reduction of premiums; however, when the carrier moves every policy on their books to the Medicare schedule, this material change is often NOT reflected as a line item – and if no other changes apply to copayment and deductibles it can make a renewal appear artificially attractive.
Prescription drugs are another area where changes occur that favor the insurer and reduce renewal rates. A recent example – a member elects to purchase a brand name drug when a generic equivalent is available. It’s common that small group insurers require the member to pay the price difference between the generic and the brand name drug, but once again, the devil is in the details…
Some insurers will apply the extra amount paid for the brand name drug to the annual out-of-pocket maximum, significantly reducing the financial burden to the member. If a brand name drug costs $1,500 per month and the generic equivalent is a $25 copayment, the extra $1,475 paid would quickly push a member closer to satisfying the out-of-pocket maximum for most medical plans. But when the carrier takes away this nuance of the policy it often goes overlooked. It’s worth noting that a change like this would not represent a significant percentage of premium savings, but it does represent additional savings to the insurer that is likely not factored in by the group – and it certainly changes the game for the member.
Bottom line – know exactly what you are getting into before accepting that enticing renewal offer from your incumbent carrier. It may be too good to be true.